Benchmarks for Pricing Virtual Good Purchases in Mobile Games

In our line of business, we are always talking with game developers and designers. Some of them ask us for advice on pricing purchases for virtual goods in their in-App Stores and in-Game economies. This is an important question. On one hand, if goods are priced too high, people will buy them less often, but if they are priced too low, your mobile game may not be earning as much revenue as it can.

How to Set a your Goal ARPU

Your APRU (Average Revenue Per User) is a key metric in free 2 play games and managing your game towards an ARPU goal is as important as navigating your ship towards its destination. Ask yourself what is a good target APRU? What amount of revenue per user would make your game economy a big success? There are several ways you can approach this question to figure all this out.

First, figure out how valuable your game is to the average user? What’s it worth to them? Is it worth 25 cents? How about 50? or $1 or even $5? Whatever you think it is worth, just say it. This number is a good indication of where your target ARPU lies.

What amount of ARPU will provide you with enough money to promote your product into the future by giving you enough to spend on new user acquisition? The amount of money for getting a new user to play your game is often referred to as cost per install or CPI. After gathering data from over 20 ad networks I can tell you that the lowest CPI you can get is $0.5 and some companies even pay as high as $2 CPI. When your ARPU is higher than your CPI, you can be confident that the money is there, letting you scale your product up the ladder quickly.

Additionally, ask yourself, who else is cutting into my average revenue per user? Perhaps you, like everyone else give 30% off the top to Google and Apple? If anyone knows a way around these guys, please let us know :-). What about other service providers or game publishers? If you have any of these, you will need to find more ways to increase your game’s ARPU so you can stay profitable.

How to Find Your Purchase Ratio

It’s important to know just how many of your users end up buying your app. Do you know your Purchase Ratio? Most games have purchase ratios between 0.5% to 5%. Getting the highest ratio depends on several factors. But it’s not set in stone either, a game’s purchase ratio can increase as your game’s reputation grows and becomes more recognized, or if users end up spending a lot of time playing your game.

The best way to explain how this formula works is by giving a few examples from actual game developers that we’ve been fortunate enough to work with. Once, a developer came to me for advice with his initial thoughts for monetizing his newly developed free-to-play game. He told me that he could sell an extra level for $0.99 and have another option to remove banner ads for dollar. In the future, he told me that he planned to develop more levels and sell them too as level packs for $1 each. Let’s assume that he makes 4 level packs, this would mean that the maximum revenue he could make from a user is $5, with the average being something lower, more like $2. For the sake of figuring out the benchmark for the formula, let’s call this $2 value the ARPPU (Average Revenue Per Paying User). Having an ARPPU of $2, combined with, let’s say a healthy Purchase Ratio conversion rate of 2%, means that his ARPU will only be $0.04 – not even a dent in the revenue bucket these days. If I would have asked him to guess what his ARPU rate really was, he would never have come up with that number!

ARPPU (avg. rev. per user) x Purchase Ratio (%) = ARPU ($$$$)

Another example from a developer is from someone that came to me for advice about selling packs of “Save Me” cheats in his store. I told him that, from my experience, selling cheats is a dangerous practice when it comes to F2P games – it’s a double-edged sword, in fact. His suggestion was that he would sell 25 “Save Me” cheats for $1 in his store. My opinion was that when you allow users to easily buy cheats, you risk making your game too easy to play which causes players to lose interest quickly. My response was that the cheat pack would probably be the last purchase that player will ever make in his store. I told him that once a player has real cheating power, he will lose interest soon after and no longer find the game challenging. In this case, his ARPPU was only $1, making his ARPU at most be $0.05 – even if his purchase conversion ratio has a maximum of 5% – that’s just not enough to make back what his game cost him in effort to develop.

Finding the right Average Revenue Per Paying User really depends on the kind of game that you’ve designed. To calculate a Target ARPPU, first figure out what target ARPU you want to reach. Say for the sake of example, you want an ARPU of $0.50 with an expected Purchase Ratio of 2%, this means that your average paying player will need to pay $25 and that some people will pay upwards of $50 for your game (Yes, ARPPU’s get that high – don’t be shocked).

The next step is to start figuring out different options and scenarios, by testing them out with users before they are launched in order to see how to better develop your ARPPU as your key benchmark value. Here are a few things to remember as you maximize the potential of your in-App purchase items:

Selling single-use virtual items or consumable resources in your store results in higher player engagement, more addictive game play, longer player retention and ultimately a consistent stream of revenue from your paying users.

Developing an Energy Mechanics in your store. Something as simple as selling lives in your games can have a similar impact to that described in #1. This trick alone is known to boost your revenue by 10% to 30%.

Sell upgrades for items in order to give players a sense of accomplishment and a feeling of progress. For as long as they feel like they are getting somewhere in your game, they will continue playing, which in turn, might lead to them making more purchases in the future.

Remember to balance the power metrics of the virtual items you sell in your store with the difficulty curve you’ve developed in your game.

Give players lots of options to choose from when shopping, but limit it in a way that makes them think wisely about spending upgrades for the purchases they make, and remember to never allow any player to accumulate enough gold coins to purchase everything in your store.

Repeat point #5 above for paying users as well. As odd as this might sound, even paying users are at risk of getting bored, never let them be able to buy everything and anything they want in your store.

If you are interested in getting some feedback and advice for pricing your F2P game, you can submit your game for review here [http://blog.soom.la/2014/03/getting-your-game-reviewed-and-featured-by-soomla.html], or drop me a line on twitter @y_nizan.

Raised in the Kibbutz and reborn in the city, Yaniv is a certified entre-parent-neur. When he’s not busy doing SEO, content marketing, administration, QA, fund raising, customer support… [stop to breathe], you can find Yaniv snowboarding down the slopes of France and hiking with his kids.
Yaniv holds a B.Sc. in Computer Science and Management from Tel Aviv University. He is also an avid blogger and a speaker at industry events. Before SOOMLA, Yaniv co-founded EyeView and INTENTClick.